RBI
project finance norms: Will absorb additional provision, says SBI chief
State Bank of India (SBI) will be able to absorb the additional provision
requirement if the Reserve Bank of India (RBI) implements the new norms on
project finance as proposed, although the pricing of loans may have to be
revisited, Chairman Dinesh Kumar Khara
said.
Last week, in the draft
norms on the project under implementation, the regulator proposed a standard
asset provision requirement of 5 per cent during the under-construction period
in a phased manner.
Higher provision means
banks have to set aside additional capital.
We have made some broad
assessments, and based on that assessment even the incremental provision that
will be required to be done, would not be any substantial amount. We will be in
a position to absorb additional provisioning numbers without much disruption, Khara said during an interaction with the media while
announcing the January-March earnings.
We will be reaching out
to RBI with our views on what they have proposed, he said.
Since RBI has proposed
higher provision requirements for existing loan facilities, the pricing of such
needs to be relooked at.
Also, the fact remains
if all this becomes a reality, maybe the pricing of such loans will be
revisited. Perhaps they (RBI) have in mind that risk is not properly priced.
Also, the fact remains if at all this becomes a reality, the pricing on loans
will be revisited, Khara said.
SBI's project finance book is around Rs 1.5 trillion.
Last year, RBI also
released a discussion paper on the expected credit loss (ECL)
model for loan-loss provisioning. While RBI has not mentioned when the
transition to the ECL framework will take place from
the current incurred loss framework, the provision requirement of banks will
also increase in the new framework.
Khara said, according to SBI's
assessment, additional provision requirements will be Rs
30,000 crore due to migration to the ECL framework. He said SBI has a
provision buffer of Rs 33,000 crore.
For ECL,
our assessment was somewhat Rs 30,000 crore, to be provided over five years. Our non-NPA (non-performing asset) provisions today are at around Rs 33,000 crore, he said.
The country's largest
lender also said the lender is open to raising equity capital in the current
financial year (2024-25).
We are quite open to
raising AT1, and equity also if need be. Our ploughback is quite handsome, indicating profit ploughed
back as capital.
SBI reported a record net profit of Rs 61,077 crore for 2023-24 which
was 21.6 per cent higher than the previous year's profit.
With a capital adequacy
ratio of 14.28 per cent, including common equity tier 1 capital of 10.36 per
cent, Khara said the bank can support Rs 7 trillion worth of growth, which is around 20 per cent
of the loan book as of March 31, 2024, Rs 37.67
trillion.
www.business-standard.com dt. 10.05.2024